NASDAQ: -5.6% (YTD:-27.5%)
The U.S. major equity indices pushed higher on Monday and Tuesday, but from Wednesday to Friday it was all downhill. This week's action boiled down to growth concerns. There were multiple developments contributing to those concerns:
- Target (TGT)?cut its Q2 operating margin guidance to around 2%, only three weeks after saying it would be as high as 5.3%, citing a need to clear excess inventory.
- ?Intel (INTC)?said the macro environment has been weaker than expected and that circumstances at this point are much worse than it had anticipated.
- Scotts Miracle-Gro (SMG)?slashed its FY22 EPS outlook well below the consensus estimate, noting its fixed cost structure has seen significantly greater pressure due to lower replenishment orders from retail partners since mid-May
- WTI crude futures went as high as $123.18/bbl while natural gas futures hit $9.66/mmbtu.??
- The OECD cut its 2022 global GDP view to 3.0% from 4.5% and the Atlanta Fed's GDPNow model estimate for Q2 was reduced to 0.9% from 1.3%.
- The Reserve Bank of Australia and the Reserve Bank of India both raised their key policy rates more than expected.
- The ECB said it intends to raise its key interest rates by 25 basis points at the July meeting and that it will follow suit with more rate hikes in September and beyond. It also announced the end of its net asset purchase program on July 1 and raised its 2022 annual inflation forecast to 6.8% from 5.1% and its 2023 annual inflation forecast to 3.5% from 2.1%.
- Several Shanghai districts were back in lockdown for COVID testing and entertainment venues in a Beijing district were closed amid renewed COVID concerns.
- ?The Index of Consumer Sentiment for June hit the lowest level on record (50.2) dating back to 1978.
- Total CPI increased 8.6% year-over-year in May, marking its largest increase since December 1981. Core CPI was up 6.0% year-over-year, down from April’s 6.2% but still a long way from the Fed's longer-run inflation goal of 2.0%.?The latter was the punctuating factor in an otherwise lousy week, as it sparked concerns about the Fed pursuing more aggressive policy actions to get inflation under control leading to Friday’s adverse market reactions in both the Treasury and equity markets.
FIXED INCOME: The 2-yr note yield spiked 22 basis points to 3.04% following the CPI report while the 10-yr note yield jumped 11 basis points to 3.16%. That left the 2s10s spread at just 12 basis points versus 27 basis points when the week began.
SECTORS: All sectors fell this week, with the best-performing being Energy with a 0.9% decline followed by Consumer Staples, which fell 2.6%. The hardest-hit sectors this week were Financials (-6.8%), Information Technology (-6.4%), Real Eestate (-6.2%) and Consumer Discretionary (-6.1%).
Our July EZTracker Newsletters come out?Sunday,?June 26
